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Pyramid scheme fraud

Pyramid scheme fraud involves an unsustainable business which rewards people for enrolling others into a business that offers a non-existent or worthless product.

A fraudster advertises a multi-level investment scheme that offers extraordinary profits for little or no risk.

You’re required to pay a fee to enter the investment scheme.

You’re then required to recruit friends or family members to enter the scheme. If you do this successfully, you’re paid out of their receipts. They are then told to recruit others to keep the chain going.

Your money is not actually invested in any product. Instead, it’s simply passed up the chain of investors. Because pyramid schemes are unauthorised and make no profits, you’re very unlikely to recover any lost investment. While the fraudster at the top will collect most of the profits, those who entered the scheme later end up losing out.

Legitimate trading schemes rely on valuable goods and services, while illegal pyramid schemes focus simply on recruiting more and more investors.

Using hard-sell techniques, fraudsters try to pressure you into making rushed decisions, giving you no time to consider the nature of the investment.

Fraudsters aim to make their business seem legitimate. This means they will often use technical jargon, impressive job titles and mock websites to look credible. If you have any suspicions about a scheme’s authenticity, you should investigate the company’s status and contact details.

Are you a victim of pyramid scheme fraud?

  • You’ve been approached about a multi-level investment scheme that offers great-sounding profits with little or no risk.
  • You’ve paid a fee to join the scheme.
  • You’ve enrolled others on the scheme and already earned money from your efforts.

What should you do if you’re a victim of pyramid scheme fraud?

  • Report the fraud to Action Fraud
  • If you think you’re actively participating in a pyramid scheme, break off contact with the fraudsters immediately and don’t invest any more money
  • If you’ve given the fraudsters your bank account details, alert your bank immediately.
  • Keep any written communications you’ve received from the pyramid scheme. They may help you give evidence to the authorities.
  • Be aware that you’re now likely to be a target for other frauds. Fraudsters often share details about people they’ve successfully targeted or approached, using different identities to commit further frauds
  • People who’ve already fallen victim to fraudsters are particularly vulnerable to the fraud recovery fraud. This is when fraudsters contact people who have already lost money through fraud and claim to be law enforcement officers or lawyers. They advise the victim that they can help them recover their lost money – but request a fee.

Protect yourself against pyramid scheme fraud

  • If you’re considering any type of investment, always remember: if it seems too good to be true, it probably is. High returns can only be achieved with high risk.
  • Pyramid schemes often involve products that are overpriced and have no real resale value. You should think about the true value of your investment before convincing friends and family to join the scheme.

How to report it

If Fraud has been committed report it to Action Fraud. For more advice and to raise any concerns, contact the Office of the Public Guardian.

Source - Action Fraud

Date Published: Jul 22, 2018

Types of fraud

A-Z of fraud

To help understand which fraud you've been affected by, we've categorised them into an alphabetical list.

What is fraud and cyber crime?

Fraud is when trickery is used to gain a dishonest advantage, which is often financial, over another person.

Advance fee fraud

Advance fee fraud is when fraudsters target victims to make advance or upfront payments for goods, services and/or financial gains that do not materialise.

Corporate fraud

Corporate fraud can be any fraud committed against a business.

Individual fraud

Individual fraud could be any fraud that targets a person directly. Individual frauds can differ from frauds affecting businesses and other organisations.

Online fraud

Some fraudsters rely on the internet to commit their crimes. Learn about some different types of internet frauds that and how to protect yourself and get safe online.

Identity fraud and identity theft

Identity theft is when your personal details are stolen and identity fraud is when those details are used to commit fraud.
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